UNH professor Ross Gittell predicts more economic struggles

Recovery from a major economic skid can take a number of shapes, according to UNH professor Ross Gittell. The simplest is the V shape, in which the economy rapidly plummets and then turns sharply around and rapidly grows. The U shape is similar but involves a slower recovery process. Worse than either of those is the L shape, in which the economy drops and then flatlines, never bouncing back.

The W shape is a bit more complicated. That’s when the economy tanks, then begins to recover, only to double-dip back into recession before ultimately climbing again. Gittell fears the current economic recession has entered that second dip in the W trajectory. A brief period of optimism has subsided and reverted into grave doubt.  

“I really feel like there’s a lot of uncertainty and I don’t think we can say with much confidence that we’re beyond the great recession,” Gittell said. “Employment recovery is really lagging.” 

Gittell was the guest speaker at the Exeter Area Chamber of Commerce’s ninth annual economic forecast at the Breakfast Hill Golf Club in Greenland on Jan. 26. Although he outlined some causes for optimism, Gittell’s overall forecast was not pretty. The worst of the crisis may be coming to an end, he said, but the recovery process will probably be painfully slow. 

The national unemployment rate hit 10 percent in December—its highest mark in the last 26 years—and is expected to reach 10.8 percent by the end of the employment decline later in 2010. There have been roughly 7.2 million job losses in the United States since the recession began in December 2007. To put that number in perspective, there are about 7 million total jobs in the six New England states combined.

The numbers in New Hampshire aren’t quite as bad. The state’s unemployment rate is currently around 7 percent and is expected to reach 7.8 percent later this year, which is below the national average and the lowest of all New England states. But that still translates to more than 26,000 total job losses.

“That impacts a lot of people,” Gittell said. “There’s a lot of people out there looking for jobs, a lot of families suffering.”
According to Gittell, New Hampshire is about five-sixths of the way to reaching the end of its employment decline. But the state’s recovery will be not be speedy. Although the economy isn’t declining as rapidly as it was a year ago, it has not yet begun to recover.

A spark of good news is that New Hampshire has been through this situation before. Gittell refers to the current crisis as the “second great recession,” the first having occurred in the early 1990s.

“We came out of that great recession in the early ’90s very strongly,” Gittell said. “We’ve been through this before, and that gives me hope.”

The economic skid of the ’90s was mainly confined to New England, whereas the current recession is affecting just about every state in the nation. During the first great recession, many New Hampshire residents migrated to other parts of the country. “Now they have no place to go, so we don’t have the same problem with out-migration,” Gittell said.

But that also means New Hampshire can’t begin to recover until the national economy turns around. In that sense, the Granite State has little control over its own economic forecast. “New Hampshire’s economic future is really going to be determined by the U.S. economy,” Gittell said.

New Hampshire’s per capita income has declined during the recession but is still the seventh highest in the nation. However, the state’s aging population is cause for concern. Unless it retains more young people, the state will experience slow growth in income and could lose its edge in high technology employment—which is especially alarming in the southeastern portion of the state. Rockingham and Hillsborough counties have the state’s highest per capita incomes and most highly educated populations. If we don’t maintain our base of high technology jobs, we won’t be able to maintain our high per capita income, Gittell said.

New Hampshire is also lagging in start-up businesses and high growth ventures, which were instrumental to getting us out of the first great recession. “We don’t have those companies that really become successful,” Gittell said. “We’re losing a lot of those firms that are really investing here.”

A piece of good news for the Seacoast is that job growth is expected to resume fastest in metro areas with high levels of education and health services and relatively strong housing markets. The Seacoast is part of the Boston metro area and generally meets those criteria.

Still, in order to recover in the long term, New Hampshire must look for ways to increase its start-up businesses, high tech companies and growing firms. In the meantime, Gittell worries about the negative psychological effect the great recession is having on New Hampshire workers and families.

“I hate to be so dire and pessimistic, but that’s the reality,” he said.